June 20, 2017 | BY admin
Mortgage interest rates are still at low levels, but they likely will increase as the Fed continues to raise rates. So if you’ve been thinking about helping your child — or grandchild — buy a home, consider acting soon. There also are some favorable tax factors that will help:
0% capital gains rate. If the child is in the 10% or 15% income tax bracket, instead of giving cash to help fund a down payment, consider giving long-term appreciated assets such as stock or mutual fund shares. The child can sell the assets without incurring any federal income taxes on the gain, and you can save the taxes you’d owe if you sold the assets yourself.
As long as the assets are worth $14,000 or less (when combined with any other 2017 gifts to the child), there will be no federal gift tax consequences — thanks to the annual gift tax exclusion. Married couples can give twice that amount tax-free if they split the gift. And if you don’t mind using up some of your lifetime exemption ($5.49 million for 2017), you can give even more. Plus, there’s the possibility that the gift and estate taxes could be repealed. If that were to happen, there’d be no limit on how much you could give tax-free (for federal purposes).
Low federal interest rates. Another tax-friendly option is lending funds to the child. Now is a good time for taking this step, too. Currently, Applicable Federal Rates — the rates that can be charged on intrafamily loans without causing unwanted tax consequences — are still quite low by historical standards. But these rates have begun to rise and are also expected to continue to increase this year. So lending money to a loved one for a home purchase sooner rather than later might be a good idea.
If you choose the loan option, it’s important to put a loan agreement in writing and actually collect payment (including interest) on the loan. Otherwise the IRS could deem the loan to actually be a taxable gift. Keep in mind that you’ll have to report the interest as income. But if the interest rate is low, the tax impact should be minimal.
If you have questions about these or other tax-efficient ways to help your child or grandchild buy a home, please contact us.
tax - taxes
April 27, 2017 | BY Paul Bonner
The White House on Wednesday issued President Donald Trump’s goals and key features for tax reform, including slashed corporate tax rates, flattened individual marginal income tax brackets, and repeal of the estate and alternative minimum taxes.
Trump outlined his proposals in a one-page sheet of bullet points headed “2017 Tax Reform for Economic Growth and American Jobs” and “The Biggest Individual and Business Tax Cut in American History.”
Speaking to reporters at the White House, Treasury Secretary Steven Mnuchin and Trump economic adviser Gary Cohn described the president’s priorities, but repeatedly rebuffed requests for details, saying those would be hammered out in negotiations with congressional leaders in the months ahead. Most of the policies hewed to those Trump put forth last fall on the campaign trail, most prominently, cutting the corporate income tax rate from its current 35% to 15% and extending it to passthrough entities, i.e., S corporations, partnerships, and entities taxed as partnerships.
For individuals, Trump would replace the current seven graduated tiers of marginal rates (10%, 15%, 25%, 28%, 33%, 35%, and 39.6%) with three: 10%, 25%, and 35%—slightly broader than the 12%, 25%, and 33% he proposed last fall. Mnuchin and Cohn declined to say at what income levels those rates would apply. Trump also reiterated his call for repeal of the net investment income tax of 3.8% imposed on unearned income and gains of high-income taxpayers by the 2010 Patient Protection and Affordable Care Act, P.L. 111-148.
The proposal would double the standard deduction; however, it would limit itemized deductions to mortgage interest and charitable contributions. It would provide “tax relief for families with child and dependent care expenses,” but neither the document nor the officials said how that might differ from the current tax credit for child and dependent care expenses available under Sec. 21.
Trump had also previously proposed repealing the alternative minimum and estate taxes. The latter currently applies only to estates larger than $5.49 million per individual. As he has previously, Trump called for ending “tax breaks that mainly benefit the wealthiest taxpayers,” but did not provide details or examples. The proposal did not specifically address the tax treatment of carried interests, which are currently taxed at capital gain tax rates. Trump, along with many Democrats, has said in the past he favors curtailing this treatment.
For businesses, besides lowering the top tax rate to 15%, the proposal calls for a territorial system of taxation, which generally would exclude from taxation foreign earned income. It also would impose a “one-time tax” on corporate earnings realized and held overseas and on which tax is deferred, possibly the same as, or consistent with, a deemed repatriation tax that Trump has previously proposed at a 10% rate.
Absent from the proposal was any mention of a border-adjustment, or destination-based cash flow, tax, which has been a key feature of the congressional Republican “blueprint” for tax reform and that Trump has discussed as a possibility previously. The proposal, however, has been widely criticized as problematic for U.S. importers and others and likely to be challenged internationally under World Trade Organization rules.
The plan does not specifically mention passthrough entities, but when he was a candidate, Trump’s tax plan included a provision that would allow owners of passthrough entities to be taxed at the proposed 15% business rate. When asked if this would provide an incentive for individuals to form passthrough entities to avoid the higher individual tax rates, Mnuchin answered that “we will make sure that there are rules in place to make sure wealthy people can’t create passthroughs” to lower their taxes.
Mnuchin said the administration would like to “move as fast as we can and get this done this year.” Congressional leaders have expressed reservations about aspects of the proposal, notably, the depth of the cuts without specifically identified revenue offsets and prospects for their passage at the intersection of budget and procedural rules. Trump claimed during the presidential campaign that his plan was revenue-neutral; it would have to be, or the cuts would have to be temporary (typically ending within a 10-year budget window), for it to advance under the reconciliation process, by which the Senate can bypass a filibuster and pass the legislation with a bare majority instead of 60 votes. Mnuchin said the proposal would “pay for itself, with economic growth and with reduction of different deductions and closing loopholes.”
For more analysis, the following are two articles analyzing the president’s tax plan.
Likely Winners & Losers Under The Trump Tax Plan
by Kelly Phillips Erb
Devoid Of Details, Trump’s Latest Tax Plan Nothing But Empty Promises
by Tony Nitti
March 21, 2017 | BY Admin
For decades, Amazon.com helped its customers dodge the sales taxes they owed to gain an advantage over its competitors. But as the company’s business strategy has changed, so have its tax collection practices. As recently as 2011, the nation’s largest e-retailer was collecting sales tax in just 5 states, home to 11 percent of the country’s population. Starting next month, when the company begins collection in Hawaii, Idaho, Maine, and New Mexico, it will officially collect every state-level sales tax in the nation on its direct sales.
Despite this progress, the company’s sales tax collection practices are still not comprehensive. It appears that Amazon is not collecting some local-level sales taxes in states such as Alaska, for instance. And Amazon refuses to require sales tax collection by many third-party sellers using its website, meaning that companies with names such as “Buy Tax Free” are using Amazon.com as a way to allow their customers to evade their sales tax responsibilities. Notably, New York Gov. Andrew Cuomo has proposed fixing this problem by requiring “marketplaces” with more than $100 million in annual sales to collect sales taxes on sales made by third-party retailers.
But despite its shortcomings, this expansion in Amazon’s tax collection practices represents a step forward for rational sales tax policy. It is therefore worth taking a look at the variety of factors that led to this reversal.
First, and perhaps most important, is that Amazon’s effort to shorten delivery times caused it to open distribution centers around the country. Whenever a retailer establishes a physical presence in a state, it comes within reach of that state’s sales tax collection laws.
Second, state lawmakers have become increasingly frustrated by the sales tax revenue gap created by e-retail and some have taken matters into their own hands by enacting laws expanding their sales tax collection requirements. The U.S. Supreme Court has placed limits on states’ authority in this area, but creative lawmakers have found ways to encourage some e-retailers to collect nonetheless.
Third and finally, it appears that Amazon’s pivot away from facilitating sales tax evasion may be helpful in building goodwill with lawmakers from whom it is asking for subsidies. Good Jobs First estimates that Amazon could soon surpass Wal-Mart as the largest retail-sector recipient of state and local government aid, meaning that it would have received over $1.2 billion in public subsidies.
While the nature of the debate surrounding Amazon and state and local tax policy may be changing, it’s certainly not coming to an end.
small business - tax
March 13, 2017 | BY Admin
House Republicans have unveiled a repeal and replacement plan for the Affordable Care Act (ACA). The GOP’s American Health Care Act (AHCA) would eliminate most of the ACA’s taxes, including the penalties connected with the individual and employer mandates, the net investment income (NII) tax and the Additional Medicare tax. Left in place, although delayed, would be the excise tax on high-dollar health plans. Also left in place, would be a number of non-tax provisions related to scope of coverage, benefits and children – including allowing dependents to continue staying on their parents’ plan until age 26, prohibiting health insurers from denying coverage or raising rates to patients based on pre-existing conditions, and forbidding lifetime limits on insurance coverage.
The House GOP plan has been rejected by Democrats. Some Republicans have said the plan does not go far enough in repealing all of the ACA. As March moves forward, a vote on the House floor is eventually expected.
March 01, 2017 | BY Chris Gaetano
The New York State Department of Taxation and Finance (NYSDTF) clarified its position Friday on whether practitioners can check the “no applicable ID” box on a return if their client, despite having a valid driver’s license number, refuses to disclose it.
“In this transition year, the first where New York is requiring taxpayers’ driver’s license information, we will permit preparers to check the ‘No Applicable ID’ box if the taxpayer refuses to provide the information,” NYSDTF acting Commissioner Nonie Manion wrote in a statement. “IF this is necessary, contemporaneous information should be kept to document the preparer used due diligence to obtain the information and the taxpayer refused.”
Manion’s statement addressed ambiguities that have emerged in the wake of the state tax department’s new requirement that all taxpayers provide their driver’s license (or other DMV-issued ID) information on their e-filed returns as an extra layer of verification. Shortly after announcing the new requirement, which practitioners had complained came with little advance notice before tax season, the department said through various spokespersons that if a client does not want to share this information, preparers may check the “No Applicable ID” even if the taxpayer does, in fact, have an applicable ID—and the return would be accepted.
However, a Feb. 17 update to the state’s Business Taxpayer Answer Center, said otherwise. In response to the question, “If my client is known to have a valid driver license or state-issued ID, but chooses not to disclose it, can I check the No applicable ID box without repercussion? Am I required to disclose this?” the state tax department site stated that “if a tax professional knows his client has a driver’s license or non-driver’s license ID, but he client refuses to comply with the requirement to provide that information, the preparer cannot certify truthfully and submit the return with the No ID box checked.”
This caused confusion among tax professionals who suddenly were unsure about what was or was not allowed. After a conference call between Manion and NYSSCPA leadership on Friday, NYSDTF drafted the statement saying that, this year, preparers can check the box in the event that their client refuses to supply the information, so long as they retain the required documentation stating that they used due diligence to obtain the ID information. Manion said NYSDTF would update its website with the updated information shortly.